|
A look at the chart of the XAU shows a profound loss of strength in the month of September. The recent higher consolidation triggered short-term buy signals for many technicians arguing that the XAU might revert to its prior up-trend. However, the recent consolidation, albeit at a higher level, seems to be losing strength instead of breaking out over 132.04. Is there a fundamental reason for this failure to thrive?
I suggest two probabilities for the inability of gold stocks to revert to their former trend. First, there seems to be more attraction to those stocks that seem to be still rallying. The “Dogs of the Dow” and pharmaceutical stocks are receiving a lot of attention recently, simply because money is being attracted by performance. The second reason is that many investors jumped into the gold rally late, leaving losses to be contended with. For mutual funds, October is tax loss month for managers to dump their losers in a mutual fund portfolio. Perhaps there will be further selling at least until the end of the month by mutual funds. Does this mean that the positive trend is over? It is still too early to tell. Technically, though, it appears that the Philadelphia Gold & Silver Index still has some downside worries before a rally is in the cards.
The Practical Investor, LLC is a State Registered Investment Advisor CONTACT
INFORMATION The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
